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Interview: Heroes of Newerth's Marc DeForest On Evolving Business Models

Gamasutra editor-at-large Leigh Alexander talks to S2's Marc DeForest about Heroes of Newerth's player base, and how the company had to evolve its business model to accommodate changes in the market.
S2's Heroes of Newerth is one of the games on the vanguard of a niche-but-strong lineup of Defense of the Ancients-style games. As such, the developer is positioned to gain incredible insight on the hardcore player's engagement - and how the business model of connected entertainment affects the player base. It's been a year since HoN launched after spending some time in beta. Now, the game currently has 420,000 unique active players and averages 30,000 people playing at any given time, with daily concurrent peaks of more than 50,000 players. "Right now, about 40 percent of our active player base logs in every day, which I find to be absolutely awesome," S2 CEO Marc DeForest tells Gamasutra. "To have almost half of your players log in once a day seems amazing, and shows the dedication of the HoN players." Further, 90 percent of registered HoN accounts are currently active, an impressive stat. "The number one influence on players and purchasers of video games is friends, and when you've got a dedicated group of gamers, a game like HoN is able to consistently grow because of the activity level of the people who play it," says DeForest. He also believes that the company's aim to focus with particular intent on the software-as-a-service model also helps drive engagement. But he also doesn't view HoN as necessarily the type of title people generally mean when they're talking about an online game operation. "We don't think of it as an 'online game', exactly, but it has the persistence of tracking how you perform in the game through the lifetime of your account, and we're constantly bringing balance changes and new content that really keeps people activated," DeForest says. In the year since the game launched, much of the company's San Francisco staff was transferred to the company's main office in Michigan - everyone except the artists, according to DeForest, a move that's resulted in a "significant increase in our communication and collaboration," he says. "It really energized the company, and since then, we've probably doubled our head count… to about 52 right now," adds DeForest. But the studio still sees itself as small, focused on maintaining an "independent, family feel." The better communication and centralized focus driven by the staff shift led the team more quickly to December's 2.0 launch, which added a new map, matchmaking features, a map editor and a microtransactions shop. But S2 is still evolving its business model -- its biggest rival aside from DotA itself is Riot Games' League of Legends, which is free-to-play versus HoN's $30 price point. And DeForest shared with Gamasutra how various evolutions in HoN's market approach have affected the user base. During HoN's beta, "We had 3.3 million registered beta accounts, although we don't know how many of those were actually unique," says DeForest. "Within the first week of retail we sold somewhere within the 200,000 range between pre-orders and sales immediately following." At half a million accounts sold the team began running promotional periods designed to offer players' friends a lower barrier to entry in joining. Then in December 2010 the 2.0 update rolled the RMT shop into the mix: "We always had the intention to bring some form of a shop to the game - we were just working through how, exactly, that was going to work," says DeForest. "But having our biggest competitor being a free game has really hampered us." "From all the info that we were gleaning, we had some pretty significant play numbers prior to the point of going pay to play, at which point our numbers about halved," says DeForest, providing the following data on number of unique daily logins, average number of users online and peak concurrent users during HoN's pre-release, on the Sunday after its retail launch, and last Sunday, at the game's anniversary. Notably, the pre-release numbers include Southeast Asia players who are no longer counted after the retail launch on May 12, 2010, as they're excluded from using the retail client. hondata600.png DeForest emphasizes that S2 is "not disappointed at all" with the game's performance at any stage of its life cycle. "In a year, we've almost doubled in size, and that's with a pay-to-play model," he says. "With the RMT shop, we've got a lot of additions that should go in a patch within the next 45 days or so. We want to flush that out and get it to a point where our average revenue per user lets us look at the possibility of a different business model." Its efforts to transition and eventually consider a free-to-play model are helped by its continued free-to-play closed beta in Southeast Asia, he says - again, current numbers related to HoN's retail client don't include these users, although to celebrate HoN's retail anniversary the company rolled out a free-to-play week for those users as well. At the same time, competition with games like LoL is healthy, DeForest suggests. "You've gotta give most of the credit to DotA, but until LoL and HoN, DotA was just a mod," he points out. Now he expects numerous developers to reveal entries to the fledgling genre within the next few months. Half-Life house Valve Software even has an entry in the works. "More competition is better… competition drives us to do better things," he says. "The more people we have to compete with, the more I want to be better for our players," says DeForest. "As long as we support and operate HoN as a service, being in at the ground floor is going to do nothing but help us."

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